The Bank of Israel is looking for buyers for the credit card companies that will be spun off from the nation’s two largest banks, Bank Hapoalim Ltd. and Bank Leumi Le-Israel Ltd.
The two banks need to sell the credit card companies they own by 2020, as part of a push to increase competition in the Israeli banking industry. If the companies’ shares are issued on the stock exchange, the banks can also choose to reduce their holdings to below 40 percent. The sale of the credit card companies could be via the sale of a controlling core, in which the buyer will need to obtain a control permit from the Bank of Israel, or through an issuance of shares on the stock exchange and the distribution of shares to the public, the central bank said in a statement on Sunday.
The entities that will buy the credit card companies — financial or non-financial institutions in Israel or abroad, or private equity firms — will be able to tap into “the rich information databases” that the credit card firms hold regarding households and small businesses, “which can help them develop and offer a variety of financial products with value for customers,” the statement said. The acquiring companies would also gain access to the “high level of expertise and experience” that the credit card companies have accumulated over the years of activity, their reputation, and “the high level of capital they hold.”
To make sure the potential buyers have a clear regulatory framework, the Bank of Israel published a final document defining the criteria that would make the players eligible to get the central bank nod, and also said it will shortly publish a final decision regarding how interchange fees are expected to be cut. Both these matters will help increase regulatory certainty for potential buyers and enable them “to formulate practical plans for the purchase and operation of the credit card companies,” the statement said. Interchange fees are fees paid between banks for the acceptance of card-based transactions.
The criteria for eligibility include “honesty and integrity, financial strength, relevant business experience” and the lack of conflicting interests, the statement said. The investment strategies of the entities that wish to purchase the companies will also be examined to make sure the entities plan to play “a major role” in the Israeli market, and “contribute to competition in the financial industry.”
“The meetings that we are having with potential buyers of the credit card companies and with investment houses clearly show their need for regulatory certainty,” said Hedva Ber, the supervisor of banks at the Bank of Israel. “We will therefore make sure that the regulatory environment is as supportive as possible so that the companies will be bought by serious entities and can realize the aims of the reform. The banks also have the option of issuing the companies on the stock exchange, so that their shares are held by the broad public.”
“The separation of the credit card companies from the banks is a main component of the measures to increase competition in banking, alongside other structural and infrastructural changes that we are advancing in Israel, such as the establishment of a central credit registry, the establishment of a joint technology bureau, measures to ease the transition between banks,” said Karnit Flug, the governor of the Bank of Israel, in the statement.